Extra Costs to
the Seller
If you are obtaining a VA or FHA
loan in order to finance your
purchase, you must include that
information in your offer. This is
because government loans place
additional financial and performance
obligations on the seller.
Non-Allowable Fees
First, VA and FHA loans prohibit
buyers from paying certain types of
fees that are often charged by
lenders, escrow companies,
settlement agents, and title
companies. They are called
"non-allowable" fees. They still get
charged anyway, but as the buyer,
you are "not allowed" to pay them.
The result is that the seller ends
up paying them instead of you.
Most of these "non-allowable" fees
come from your lender. By the time
you are making an offer you should
have already been pre-qualified by a
loan officer, so you or your real
estate agent can ask how much the
lender’s non-allowable fees will be.
Experienced agents should also have
an idea of what non-allowable fees
will be charged by the escrow or
settlement agent and the title
insurance company.
Since these are fees the seller
would not pay on an offer with
conventional financing, this
information must be included in your
offer. You should also realize that
since the seller will be paying
these additional fees, they may be a
little less negotiable on the price.
VA and
FHA Appraisals
Home appraisal inspections on FHA
and VA loans are a little more
detailed than on conventional loans
(and more expensive). The appraisers
are required to perform certain
minimum inspections as well as
evaluate the market value of the
property. Although these inspections
are not as detailed as a
professional home inspection and
should not be considered a
substitute, sometimes repairs are
required.
These are additional costs the
seller would not be obligated to pay
for someone obtaining conventional
financing, so your offer should
include a maximum figure for these
repairs. Otherwise the seller is
signing the equivalent of a blank
check, and they do not want to do
that.
At the same time, whatever figure
you put in will most likely affect
the seller’s willingness to
negotiate on price. If you put $500
as an estimate, the seller may be
$500 less negotiable on their price.
If no repairs are required, you may
have been able to get the house for
$500 less than what you and the
seller agreed on as the price. The
solution is to add a clause to your
offer that goes something like this.
"If required repairs cost less than
the maximum amount allowed, the
excess will be credited toward
buyer’s closing costs."
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